OPINION: If it takes more time and effort to work out how much tax needs to be paid, you have to question the logic behind making that tax even more complicated. I’m talking about FBT, the classic example of a justifiable tax that has been over engineered.
Carparks provided to employees have long been exempt from FBT if the car park is on the employers premises. The Government has announced legislation is to be introduced to extend FBT to carparks provided to employees, but unusually, only if the carparks are situated in the Auckland and Wellington CBDs. Although the rationale is that these locations provide the greatest benefit to employees – taxing employer’s based on geographical location is hardly sound tax policy. Complications will arise as exemptions will exist for car parks used by work vehicles, late night shifts and disabled car parks. Whether or not FBT will apply to an employee who accidentally parks in a disabled car park, while using a work vehicle because they are working late is anyone’s guess.
The definition of income for the purpose of calculating entitlements for social assistance purposes (eg working for families) is to also be amended to include explicit salary trade-offs. This will see the benefit value of car parks, vehicles and vouchers etc being included as income, thereby reducing entitlements.
The Government’s sales pitch is that it could have been worse because the changes originally floated back in April were wider reaching than the changes outlined above. Whilst they could have been worse, whether the tax revenue which will be generated outweighs the cost to taxpayers, remains to be seen.
The only bright side is that the increased cost of having your accountant work out the tax consequences of the above changes should be tax deductible.
Mike Bignell is a partner at PwC Waikato.
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